Adjusting expectations

If you’re a condo owner in Calgary, you may be telling yourself that “what goes down must come up,” but it’s a fine line between thoughtful analysis and wishful thinking.

“The condo-apartment sector is still facing a lot of challenges,” said CREB® chief economist Ann-Marie Lurie.

“While sales improved in 2017, it wasn’t enough to keep pace with new listings, so we still had price declines.”

The benchmark price dropped four per cent on an average annual basis compared to last year, and prices are down nearly 12 per cent since 2014.

“This segment felt the most impact from the recent recession because of competition in the new-home market,” said Lurie. “If you think back prior to the recession, we had near-record levels of multi-family starts and most were condo apartments.”

As a result, a lot of new-home product is comprised of condos, so the resale market is competing with that new inventory and causing price declines.

“This segment felt the most impact from the recent recession because of competition in the new-home market. If you think back prior to the recession, we had near-record levels of multi-family starts and most were condo apartments.” – Ann-Marie Lurie, CREB® chief economist

Moving forward, Lurie says prices will continue to fall in 2018. Though she sees some improved capacity due to higher lending rates, there is also a lot of supply choice.

“Under-construction numbers have risen and a good portion of them are condo apartments. That is influencing the market, and until those numbers come down to a reasonable level, it’s hard to see a transition to more stability in the condo apartment sector,” she said. “There are some factors that could support demand growth but we still have to work through that additional supply.”

For both buyers and sellers, the advice is similar: be aware of your specific market and your objectives.
“If you’re purchasing, what is your long-term intention with the property? Do you plan to live in it or use it as an investment? How long are you planning to hold it? If you’re selling, why are you selling, and are you aware of market conditions and competing inventory?” said Lurie.

Many Calgarians looking at the market have one eye on interest rates and the other on oil prices. However, these might not always be the best indicators of housing market confidence.

“Higher oil prices often increase employment, which boosts confidence in the market, but we’re not necessarily seeing that right now in the employment figures,” said Lurie. “Growth in Calgary is much slower than what we’ve experienced in the past, so we need to adjust our expectations somewhat.”

Still, Lurie expects that the growth we do see this year will help to offset the impact of higher interest rates on affordability and demand.